From: Sumanta Ray [SRAY@cwa-union.org]
Sent: Monday, December 15, 2003 11:46 AM
To: rule-comments@sec.gov
Subject: File No. S7-19-03
December 12, 2003
Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549-0609
Dear Mr. Katz:
Re:File No. S7-19-03
I am writing on behalf of the Communications Workers of America (the
"CWA") which represents 700,000 participants and beneficiaries of
pension funds with assets in excess of $400 billion that are invested in
companies listed on our national exchanges. I am also a trustee of the
CWA Pension Fund. I am writing today to offer supporting comments on
Securities and Exchange Commission proposal S7-19-03 regarding
shareholder director nominations and equal access to corporate proxy
statements.
Recent scandals at companies like WorldCom and Adelphia have exposed
how self-dealing CEOs and lame-duck boards can have devastating
consequences for corporations and the investors, employees and
communities that depend on them. We, therefore, want to commend the
Commission for proposing historic new rules that could, for the first
time, give institutional shareholders the ability to challenge CEOs'
power to handpick their own directors.
The proposed rules reflect the Commission's thoughtful and careful
approach to this very significant corporate reform. In particular, we
welcome those safeguardsincluding significant ownership and holding
period requirements, and limitations on the number of shareholder
nomineesthat ensure that the rules do not facilitate corporate raids or
result in potentially frivolous nominees at numerous companies. As
proposed, however, the rules also contain certain barriers that would
make them difficult for even the largest investors to use, and
impossible to do so in a timely manner. Taken together, these barriers
may undermine the intent and spirit of the proposed rules.
In particular, we believe the triggering requirements are unnecessary
given the substantial ownership required for shareholders to place
nominees in the proxy. Moreover, the two proposed triggers create
serious additional problems. First, the proposed triggers entail a
two-year process, an untenable delay at a company or board in crisis.
Second, the proposed one percent ownership requirement for shareholders
to submit a triggering proposal is far too high. A shareholder seeking
to introduce such a proposal at the average S&P 500 company would need
to hold shares worth over $180 million; we believe any shareholder that
meets the existing 14a-8 requirements should be able to sponsor such a
proposal. Third, the proposed 35 percent director withhold threshold is
also too high given historical experience, and should be lowered to 20
percent.
In addition, while we support a significant ownership requirement for
placing nominees in the proxy, we believe the proposed 5 percent
threshold is too high. This threshold would require a shareholder or
shareholder group seeking to place nominees in the proxy of the average
S&P 500 company to own shares worth roughly $900 million. We encourage
the Commission to lower the threshold to 3 percent, a level that would
more fairly balance the Commission's concerns with the interests of
corporations and their shareholders. Finally, we believe that any
shareholder group meeting these requirements should be allowed to
include a minimum of two directors in the proxy, regardless of the size
of a company's board.
By adopting final rules that truly give responsible long-term investors
timely and effective access to the proxy, the Commission can introduce
genuine accountability to a boardroom culture that for too long has been
characterized by cozy relationships and a resulting unwillingness to
challenge management. This is certain to yield significant benefitsin
terms of board of director independence, performance and
accountabilitythat extend well beyond the few companies where the new
rules are actually used.
On behalf of the CWA members who are participants of pension plans, I
thank you for this opportunity to offer our strong support for this
historic proposal, and encourage the Commission to adopt final rules
that are responsive to our concerns.
Sincerely,
Morton Bahr
President